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Following press reports over the weekend that the Royal Bank of Scotland is planning to split its investment banking division in two, Financial News can reveal that the markets business will be run by two co-heads who will report directly to Stephen Hester, the group chief executive.

Peter Nielsen, the chief executive of the current markets business, which sits within the markets and international banking division that is to be split up, will co-head the new unit together with Suneel Kamlani, the deputy chief executive of markets and international banking, according to sources familiar with the plans.

Kamlani joined RBS in 2010 from UBS where he was instrumental in helping the Swiss bank rebuild its balance sheet through the worst of the financial crisis.

The second part of RBS’s investment bank, international banking, will be run by John Owen, who will also report directly to Hester, as first reported by Sky News on Saturday.

As part of the shake-up, John Hourican, the chief executive of markets and international banking at RBS, will leave the bank. Plans to split the investment banking division and Hourican’s subsequent departure from the bank have been accelerated in the lead up to RBS’s settlement with UK and US regulators over alleged interest rate rigging.

There had been press speculation that Nielsen, Hourican’s main lieutenant, might also be leaving the bank and that this would form part of the Libor settlement. But Financial News understands this to be incorrect.

RBS is expected to be hit by £500m in fines as part of the settlement, which Hester has been quoted as saying will be a “difficult” moment for the bank. The fines compare to the £290m that was paid by Barclays over allegations of Libor manipulation.

It is expected that the settlement and plans for the investment bank will be announced in the next couple of weeks. However, the reorganisation still needs to be approved by the board.

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It is understood that the split will allow RBS to reduce the duplication of some functions – for example, the management of risk – that exists under the current structure. It will also allow the newly separate divisions to make faster strategic decisions. These could lead to further shrinkage of RBS's investment banking functions.

RBS’s markets and international banking division was formed a year ago when the bank slimmed down its global banking and markets business after announcing it would exit a number of areas such as cash equities and corporate broking.